Insurance panel delays proposals

Wednesday

A special commission on coastal homeowners insurance has postponed its eagerly awaited recommendations to the Legislature, as it delves into contentious issues including the FAIR Plan.

BOSTON — A special commission on coastal homeowners insurance has postponed its eagerly awaited recommendations to the state Legislature until Nov. 30, as it delves into contentious issues like the FAIR Plan and a proposed catastrophic event fund.

The 16-member commission has been meeting privately at the Statehouse to draft its recommendations.

"What's happening in this is the issues are very complicated, and there are some real differences of opinion on the commission, honestly, and we are wrestling with those differences," said state Sen. Robert O'Leary, D-Barnstable, a member of the group.

O'Leary said the conflicts were primarily over the FAIR Plan and its role in the market, though he declined to give details. The commission has yet to discuss the so-called CAT fund in any depth.

The commission was created by law in the state budget last summer at the urging of O'Leary and Senate President Therese Murray, D-Plymouth. It includes representatives of government, the insurance industry and consumer groups.

The commission was charged with getting to the bottom of the double-digit premium increases that have shaken Cape Cod and a growing number of coastal communities. In areas like the Cape, insurers are refusing to write new policies because of the potential for damage during a major storm.

On the Cape, about 50,000 homeowners, more than 40 percent of the market, are now on the FAIR Plan, the state's insurer of last resort.

The insurance industry has blamed the problem on the reinsurance industry, which backs them up in disaster claims. And the reinsurance industry has blamed new storm models that show a much greater financial risk on the coast because of heavy development.

The commission missed its Oct. 1 deadline to make recommendations, initially postponing it until tomorrow. But now the commission has decided to take until Nov. 30, citing the complexity of the issue.

The delay is not expected to have any impact on the latest request for a hike in FAIR Plan premiums. The FAIR Plan is requesting an increase of 25 percent on the Cape and Islands. The increase would be 13.2 percent statewide.

Insurance Commissioner Nonnie Burnes is reviewing the request, but is not expected to make a decision before Jan. 1. As part of the formal regulatory process, Attorney General Martha Coakley has advised Burnes to cut rates on the Cape and Islands by 29 percent.

Burnes also sits on the special commission.

Regardless of what the commission recommends — and when — any proposal will still have to be debated by the state Legislature.

"The commission is meeting regularly, and we are debating this issue at great length," O'Leary said. "It's not just an exercise."

O'Leary has championed the CAT fund, or catastrophe fund, to be paid for by the state and insurance companies.

The idea, based on a CAT fund in Florida, is to give insurance companies a cheaper option than re-insurance. The state would make a $7.5 million annual contribution to the tax-exempt fund for two years. The fund would eventually grow to $5 billion to $6 billion in a decade.

But Associated Industries of Massachusetts, a powerful business lobby, yesterday came out against a provision of the CAT fund that would help cover emergencies. If the state fund was wiped out by a huge event like a hurricane, an assessment of up to 6 percent of the premium would be placed on all property and casualty insurance policyholders in the state to make up the difference.

AIM said in written comments that the assessment would unfairly charge businesses that are located nowhere near the coast. The business group said the levy would also apply to workers compensation insurance, which O'Leary denied.

"We question the equity and advisability of taxing other lines of insurance, especially workers compensation insurance policy holders and carriers, to recapitalize a fund whose specific purpose is homeowners insurance, and we ask you to reject this proposal," said John R. Regan, an AIM executive vice president.

State Rep. Eric Turkington, D-Falmouth, who serves on the commission, said he is confident the commission will reach a consensus this fall.

"We've got people from all sides of this issue chiming in whenever anything comes up, and that's very unusual for all of us, to hear from the consumer advocates and the insurance industry and the reinsurance brokers, they are all there," he said.

David Kibbe can be reached at dkottaway@aol.com.

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